In a call auction, orders are entered into the system continuously filling the auction order book but remain unexecuted till the end of the order entry period when the orders get matched into trades at a single price. Call auctions represent an alternative trading strategy, where the order flow over a certain time period is collected, and the market opening price and quantity traded are derived based on aggregated supply and demand for the underlying.
It follows the concept of multi-lateral order matching as compared to constant bilateral (buy/ sell) matching of orders that happens in the continuous trading session to determine trades.

It leads to reduced price volatility due to multiple matching of orders at a single price.

Greater liquidity due to the collection of orders providing a deeper demand-supply schedule.

Better Price discovery as errors get reduced due to collection of orders.

It leads to reduced market impact as any given size of the order is small in relation to the counterpart orders when the latter are collected over time.

It leads to lower cost of transaction as the trades executed during the call auction session do not incur impact cost.

It acts as a fairer market especially for small, non professional investors because all trades get executed at the same price. Also the simultaneity of trades eliminates the possibility of front running customer orders in the same security.

What will be the timings of Call Auction Pre-Open Session? When will the continuous trading session start?

A.

Note: The indicative schedule is given below. The call auction timings would be intimated by the Exchange from time to time. Also the exchange will publish the list of scrips eligible for call auction from time to time

During the first 7-8 minutes of the session, members would be allowed to only enter new orders and modify/cancel entered orders. Order entry session will randomly stop anytime between the 7th & 8th minute. Stock-wise order matching will start post the order entry & trades will get executed. All orders entered in the system for any particular stock that will get executed into trades will match at the same price, i.e. the market opening price for that stock. Once the order matching & trade execution period is over, there will be a buffer period before the start of the continuous trading session.

Cumulative market buy and sell orders will be added to each of the cumulative buy
and sell quantities at available price points.

Step 2: Determining the Maximum Tradable Quantity

The tradable quantity at an eligible price point is the minimum of the cumulative
buy quantity and cumulative sell quantity at that price point. The price point,
at which the tradable quantity is maximum, is considered the opening price. If there
is a single price point at which the quantity traded is maximum then that is the
opening price.

If there are multiple price points with the same traded quantity, we proceed to
the next step.

Step 3: Establishing Order Imbalance

The order imbalance is calculated as the difference between the cumulative buy quantity
and cumulative sell quantity at each eligible price point. If there is a single
volume maximizing price at which the absolute unfilled/unmatched quantity (order
imbalance) is minimum that price is the opening price.

If there is multiple volume maximizing prices at which the order imbalance is minimum,
then we proceed to the next step.

Step 4: Comparing with the Previous Closing Price

To arrive at the final price we choose the potential price (obtained from the previous
steps) which is closest to the previous closing price. This single price point is
chosen as final opening price at which all orders are executed. In case the previous
day’s closing price is the mid value of a pair of prices which are closest to it,
then the previous day’s closing price itself will be considered the market opening
price. In case of corporate actions, previous day’s closing price will be the adjusted
for the corporate action.

Is modification/cancellation of orders allowed during the pre-open session?

A.

Modification/ cancellation of orders would be allowed only during the first 7-8 minutes of order entry period before it is randomly stopped by the system. Order modification/ cancellation would not be allowed from 9:08 – 9:15am till start of continuous session.

After the order entry session, i.e. post 9:08am, as and when order matching happens, orders would be executed into trades and trade confirmation will be sent. In the event of the opening price not determined during the call auction period, all pending market orders would be moved to the continuous session at the previous close price.

All unmatched limit orders in the pre-open session will be shifted to the order book of the continuous trading session on price-time priority basis.

All unmatched market orders will be shifted to the order book of the continuous trading session at the market opening price on price-time priority basis. In other words, unmatched market orders will be moved to the continuous session as limit orders priced at the opening price, and will retain their original time stamp. In the event of the opening price not determined during the call auction period, all pending market orders would be moved to the continuous session at the previous close price.

What type of orders will be permitted during the pre-open session & which will get priority?

A.

During the pre-open session, only Limit Orders & Market Orders would be allowed during order entry. Limit orders will get priority over market orders at the time of trade execution.
If there are no limit orders in the system, all market orders will be executed at the last closing price.

What happens if there are no limit orders for any particular stock(s) during the pre-open session?

A.

If there are only market orders and not a single limit order for any particular stock(s), all such market order will assume the price of previous close price for determining the price point. Unmatched orders shall be shifted to the order book of the continuous market at the previous closing price following time priority. Previous days closing price willl be the opening price.

What happens if there are no trades for any particular stock(s) during the pre-open session? How will the opening price be discovered?

A.

If no trades get executed for any particular stock(s) during the pre-open session, the orders entered in the pre-open session will be shifted to the order book of the continuous trading session on time priority basis. The price of the first trade during the continuous trading session will be taken as the opening price for that particular stock(s).

How will the SENSEX and other indices be calculated during the pre-open session? When will actual SENSEX be calculated?

A.

During the Order Entry period, based on the orders received, indicative opening price(s) will be calculated at regular intervals and disseminated along with the indicative cumulative buy and sell quantity for the stock. Based on the indicative opening prices, an indicative value of SENSEX and other indices will also be displayed. At the end of the order matching period, when the opening price of all stocks is determined, the actual value of SENSEX will be calculated which will be the opening value of SENSEX.

What kind of information will be available during the pre-open session? Will the Order book be displayed?

A.

In the pre-open session, indicative opening price(s) will be calculated for each stock at regular intervals and disseminated along with the indicative cumulative buy and sell quantity for that stock and the indicative index.

The system will disseminate the following information for all stocks –

Cumulative Buy Quantity at the price point

Cumulative Sell Quantity at the price point

Match-able Quantity at the price point

The potential matching price

The system will display the TOUCHLINE based on the possible open price so calculated along with the details of quantities available at the TOUCHLINE PRICES.

In the market depth window, the indicative opening price along with the next four prices will be disseminated. The price points would also have the details of aggregate quantities available on the buy and sell side separately.

If no indicative price is calculated, then the best available buy & sell orders will be displayed.

What happens if SENSEX crosses 10%, 15% or 20% during the pre-open session?

A.

In the event SENSEX breaches the threshold levels given above upon calculation of opening value, market wide circuit breakers will be applicable & a trading halt will be triggered as per SEBI Circular Ref. No. SMDRPD/Policy/Cir-37 /2001 dated June 28, 2001. The halt shall be applicable at the start of the continuous trading session. However, the Index breach will not impact execution and confirmation of trades during the pre-open matching session.